Has mortgage modification helped homeowners? Don’t get out the confetti and champagne until you’ve read this
So many of my clients had so much hope that the mortgage reforms of the past 18 months would result in them being able to afford to keep their homes.
Some clients thought the reform would enable them to avoid filing bankruptcy–but when the ink was dry the payment reduction was significant and they still filed. Others tried unsuccessfully to get a HAMP modification and filed bankruptcy only after months applying, reapplying, and then finally being denied.
Around 300,000 loans have been permanently modified–meaning borrowers mortgage payments have been reduced to 31% of the homeowner’s gross income. Lenders haven’t been reducing principal balances yet–instead they’ve focused on reducing interest rates, or stretching mortgage terms from 30 to 40 years.
The latest numbers tell us that 1.2 million loans are somewhere in the loan modification process, and that of those, between 20-25% of borrowers have dropped out of the mortgage modification plan.
The Feds expect more homeowners to drop out in the coming months and also expect fewer homeowners to qualify for the trial programs once lenders get more efficient at administering the program.
The Treasury reports that borrowers didn’t make the trial payments, failed to provide documentation needed to ‘finalize’ the trial payments AND because homeowners are simply drowning in too much debt to be saved by loan modification.
I’ll write it again because it’s so important–many people are drowning in too much debt to be helped by loan modification.
I see the reality of this play out in my office several times each week when I meet with clients who are in the loan modification program, and who realize that they’re still on a sinking ship.
Unfortunately HAMP doesn’t do anything to help you deal with 29% interest on your credit card bills. A HAMP modification won’t stop Big Credit from suing you, garnishing your wages garnished, or attacking your assets.
I am not telling you to not try for a loan modification, but I am writing to warn you that HAMP alone may not be enough.
You should be advised about how all of your debts interact in your grand scheme of things. That’s where I come in. It’s my job to talk to you about all of your assets and all of your liabilities. I will advise you about keeping or surrendering your property. I will talk to you about whether bankruptcy will really solve your problems and offer a fresh start.
Here’s the link to the HAMP modification website where you can see if you qualify.
Call my office at (404) 418 8879 to set up your consultation with me, Attorney McDuffie.